 Just
the facts... please!
Der Invest
Informant
Randy Buss
8 February, 2005
I know it should not surprise any of us anymore that the politicians,
i.e. cheerleaders, continued to laud the "economic recovery"
they think they have engineered or expertly brought about but
I nevertheless have my habitual and nagging doubts. I'm not a
perma-bear but somehow, down in the trenches of trying to eek
out a living, pay my taxes, have an occasional night out on the
town and then pay for all the residuals of a "normal"
life, I feel that economic recoveries somehow "feel"
a lot different than what those politicians and government economists
keep screaming at us, "WE ARE IN A RECOVERY - THINGS WILL
BE FINE. WE ARE ON THE ROAD TO PROSPERITY." Politicians
have a most wonderful brain whereby REAL facts are disregarded
and THINGS WHICH ARE PATENTLY NOT TRUE are turned into factoids.
OK, so here are some very recent
REAL facts that both you and I need to consider, regardless of
what your local politician at the local media outlet is screaming
at you. No order of importance is implied here
1) The real German unemployment
is near 20%, or 8 million. The government readily admits to 6,5
million, or 15%, even though they officially report only 5 million.
The difference of 1.5 million are those on "government projects."
But, like I said, the other 1.5 million, thus making 8 million,
are forced early retirements, government shelter programs, those
out of work but who havent actually signed up, etc.
2) The US "experts"
were calling for 200,000 new jobs. Hmmm, it was only 146,000.
Aw, what the hell, only 25% off target !! We're experts you know.
The simple fact is : this number disappointed. "There
is no mistaking the anaemic character of job creation that we
are getting," said Dick Berner, chief US economist and
Morgan Stanley. The biggest highlight, in the last year the US
has LOST 2.8 million manufacturing jobs. Likewise, if there was
a resurgent job outlook, an inherent wage pressure would be noted.
At the moment there is none. Hence any slackening on the consumption/demand
front leaves only asset price increases to take up the slack.
See Housing graphic below. This is NOT the stuff of economic
recoveries. The second point is, most of the new jobs are in
the low end sector.
Currently the Housing index
is 10% above its 50 dma AND 25% above its 200 dma. Bubble anybody
?
And this in just the past 3 months. This is now becoming very
scary and may be the KEY thing to watch as it could be THE PROXY
for consumer demand - when this dam breaks, make way for high
ground.
3) The EU officials say inflation
is negligible. I now show you my middle finger pointed upward,
all other fingers are down. Food is rocketing higher, petrol
higher, restaurants & cinema higher, medical insurance up
50% in 3 years, building materials higher, on and on. But, inflation
is negligible. Likewise, unemployment levels are creeping up
all over and profitable companies continue to lay off more to
keep the bottom line up for shareholders. Meanwhile, more German
industry moves to Eastern Europe as I predicted.
4) The price of crude is creeping
back up to the $50 bbl level. Russia has come out and said they
will end the de facto USD peg and re-align to the Euro. They
have now signalled an end to the Dollar hegemony. At the G7 meeting,
the chinese didn't even think about a revaluation peg for the
Yuan. The world may slowly slip over to the Euro peg. This would
put a pin in the bubble theory of a short squeeze... on the USD
if nobody wants the damn thing any longer. If both commodity-producer
nations and Central Banks are slowing and controllably offloading
the USD and moving on to bigger and better things, where does
this leave the USD? Certainly not being short sqeezed.just a
thought.
This might take a while but
if it continues then the USD will be up a creek without a paddlerudderless
and drifting. Meanwhile, right now, the USD is bouncing up and
needs to beat the red resistance level. An upside target of 87
(fibo 38%) might be in the cards but then may fall further as
the trend indicates. PS Even Greenspan said the USD needs to
fall further. Why? Because he can't raise rates too quickly or
the Asset-Consumption Model outlined above starts to unravel
quickly and falls apart.
5) US Treasuries: the most
important thing right now is the yield spread on the short and
long bonds and the supply/demand question. The upcoming auction
by the US Treasury to auction off $51 billion in 3, 5 and 10
year notes just as foreign Central Banks have been net sellers
up to 2 February is not a particularly high vote of confidence.
Taking the slogan "What if there was an auction and nobody
showed up?" I hope they have a Plan B in mind.
6) And finally, we still have
the entire open field of geopolitics and Iraq, Iran, Israel/Palestine,
etc etc. Funny too how nobody is mentioning wildly about how
the oil price is rising again as they did when it was falling,
or better, consolidating, before a next leg up. The Commodities
index certainly is still a wide open field and likely will be
with China in question mark mode of "hard or soft or no
landing at all." Trying to get reliable and timely information
regarding China seems to be my biggest challenge...
So, all in all, I'd say things
are not nearly so wonderful and rosy as the politicians like
to portray it. There are still very big questions and problems
ailing the world economy and instead of admitting and addressing
these things, the politicians just keep rolling them over to
the next election.
In conclusion, I have learned
to do my own research and have simply ignored the politicians
and pundits because I don't know their hidden agenda(s) but I
do know that markets have a way of making many a fool and its
simply in our own best interest to do our own homework. My only
agenda is to keep a substantial part of my savings around to
fight another round in the investment battle. That is indeed
a very difficult challenge in today's world.
More on this in upcoming issues
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to Der Invest Informant here.
6 February, 2005
Randolph Buss
email: editor@dinl.net
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